The reform of the Interinstitutional Commission, proposed so that the Ecuadorian Institute of Social Security (IESS) will have money to pay pensions to retirees in the near future, continues to mark the debate in Ecuador and thus adds remarks, although those who present them also see that the debate itself creates an opportunity to carry out technical and non-political financial studies and leads, with a predisposition to accept the current demographic reality, “to prevent drastic state actions or partial actions that carry the problem into the future.”

Fernando Mosquera, who is part of the Study Committee for Social Security, expresses several objections to the proposal, especially for the introduction of the system of individual capitalization, since he believes that the benefits discussed would not be realized, and by reducing pensions he realizes that “instead of saving the system, we will condemn it to failure.”

The Commission’s proposal establishes that the pension will consist of three factors: a basic pension of 40% of the state contribution, a supplementary pension that will be in accordance with membership contributions over the years, and individual savings. But ultimately, it seeks to make them less, because the replacement rate (the percentage they receive as a pension compared to what they used to pay in) is considered too high.

So, according to what Mosquera reads, the reform proposes the existence of a Distribution System whose strength is intergenerational solidarity and individual capitalization, which enables personal control of personal savings. However, for an expert, individual capitalization of a private nature requires enormous control of supervisory systems, there would be high costs to mitigate financial risks. In addition, in Ecuador it can be called a form of privatization, which would qualify as unconstitutional. According to Mosquera, individual capitalization deepens economic inequality.

It also points out that the Commission’s proposal drops by 20% in each tranche of pension value determination, “causing a low incentive for young people or new members to be encouraged to be involved in the social security system”.

The second topic to be analyzed is that of so-called “express quotes”. This is when a branch makes contributions for several years but ends up with good pensions. In relation to this topic, the expert points out that in the Ecuadorian pension system, the difference in contribution rates means that individuals with similar active income, through different contribution periods, would receive a very similar pension, which makes their compensation unfair, because the contribution effort is different. In this sense, the extension of the contribution period from 30 to 35 years, or from 15 to 25 years or from 10 to 15 years, from the age between 65 or 70 years, as proposed, “is not fixed by the addition of the contribution time”. He explains that, in his opinion, higher mandatory contributions should be established, in those “express” contribution periods, which are foreseen by the Ecuadorian legislation on social security.

According to Mosquera’s submission, the Commission intends to limit adjustments for inflation, especially in high pensions. This is how it is suggested:

But on this point it is pointed out that there would be a loss of purchasing power for everyone and it would not attract new branches and could be argued to be unconstitutional.

The pensioners are even asking for the announcement of the presidential candidates to be included in this debate. Henry Llanes, president of the National Front for the new IESS, points to this before the proposal, which he considers evidence of the regression of rights. “It is proposed to increase the seniority of contributions, and consequently the age limit for retirement, as well as to reduce the amount of the pension. It is proposed to increase the contribution period for people aged 65 and 70. The thread will break at the thinnest part and will affect the old and the old”.